ET Now: Given that we put on close to 4 per cent to 5 per cent in the month of June, how do you expect the next series to pan out?

Gajendra Nagpal: I do believe that since the market is now getting a lot of hope as the Prime Minister is taking charge of the Finance Ministry -- and if we do not see any adverse global signs -- the next sessions are going to be moderately bullish. I personally feel that the market is going to remain on a positive bias mode and the expectations will be reasonably high. So the next series will be more or less buy on dips.

ET Now: So are you saying that the market is hopeful of the Prime Minister having taken charge of the Finance Ministry, or are you saying that they are worried about him having taking charge?

Gajendra Nagpal: No, the market is very hopeful for two reasons. Firstly, we have seen that the Prime Minister is more comfortable in economy-related affairs than any other things. We have already concluded that he is more of a finance professional than a politician. So that is one thing that the market is absolutely comfortable with. Secondly, there are many reforms that are the low lying fruits, something on the lines of allowing FDI in multibrand retail or going ahead with pension sector reforms. Therefore, after the presidential election, we would see a big flurry of announcements coming from the government. So these expectations are likely to keep the Sensex and the Nifty somewhat on the higher pedestal.

ET Now: But the point is that after all the positive commentary that came out last evening -- and you would agree that the patience levels in the markets are going down with each passing day -- if we do not see movement on the part of the finance ministry going forward, how should we expect the market to react?

Gajendra Nagpal: If the next 45 days window is not exploited to the advantage of the market and no big bang announcements are made, then I am afraid the market is going to go into a tailspin. Factors like elections -- regardless of whether they happen in 2013 or 2014 -- will start to weigh on the mind of the market, and obviously then general market expectations will come down. The political parties will get too caught up in forming allies than focusing on the market sentiment. So basically, the next 45-60 days time-frame is when the expectations will be high and if the government fails to deliver, the markets will take a big plunge after that.

ET Now: What would you make of the banking sector and how would you play that?

Gajendra Nagpal: I believe if we are able to push through the diesel price hike and also increase LPG budget or maybe bring about some kind of a cut in petrol prices -- if the external environment remains a little benign to us -- then the fiscal deficit can come down to something like Rs 1,30,000-1,35,000 crore. This would make it possible for the RBI to bring the interest rates down. If the RBI can cut rates by, let us say, 100 bps over the next few months, then the inflation phase can be left behind and the banking sector can start to bounce back. That being said, HDFC Bank and State Bank of India continue to remain my favourite, and I would want to take a chance on them because once the announcements start to happen, these stocks would rally.